Speed And Specialty

November 2, 2006

T his month, Yarn Market asked spinners to highlight the past year’s business trends. In
other words, who and what are driving the yarn market today? The answers to increasingly complex
and price-driven markets appear to include: performance, product development and speed — especially
for export markets. The challenges continue to be fiber and yarn pricing, and industry and customer
consolidation.

Specialty knitters are searching for unique, value-added components — such as performance
characteristics or eco-friendliness — that enable product differentiation. This includes
performance yarns with wicking properties and eco-friendly yarns such as bamboo.

“They want to hang this tag of performance onto their product like the Nike Dri-Fit,” said a
specialty ring spinner. “Another recent trend is the high-end fashion T-shirt market seeking a
unique vintage look and creating market opportunities for specialty cotton yarns.”

The Export Equation

As exports become an increasingly
significant share of spinners’ business, lead time and pricing are key to gaining this business.

“It’s a moving target. In my opinion, lead time may be more important than price, at least
in the specialty area,” a specialty ring spinner said.

One spinner mentioned that some Asian companies are making fabric at home and having their
cut-and-sew work done in Central America. Their prices can’t be beaten by domestic spinners, but
some business can be had for time-sensitive products, as Asian manufacturers sometimes need quick
changes.

“Our open-end business is experiencing year-end spot orders,” said a multisystem spinner. “
Much of this is fill-in business that cannot be imported in a timely fashion. It’s part [Caribbean
Basin Trade Partnership Act] business and part fashion-driven.”

The Environment

As more organizations recognize the
value of social responsibility, this environmental focus is creating demand for more eco-friendly
textile products, such as organic cotton and other more sustainable raw materials.

“We are hearing more emphasis on eco-friendly products — for example, Wal-Mart’s move toward
increased consumption of organic cotton,” said a ring spinner. “Nike has also committed to
increasing organic cotton as a component of its 100 percent cotton products.”

Year-End Outlook

One spinner allowed that “our
business continues 24/7, although we anticipate weakening demand later in the fourth quarter. We
anticipate the first half of 2007 to mirror this current year, which was very positive.”

An industrial spinner reported his operations were “running steady,” with three shifts on a
five-day schedule.

“I expect from now to the end of the year to be soft,” he said. “Things generally pick up
right after the first of the year.”

“Many of our customers feel their business will be as strong or stronger next year,” said a
multisystem spinner. “This is a good sign. Yet, we are concerned about man-made fiber supply having
recently seen the exit or restructuring of some domestic fiber producers.”

Fiber, Yarn Pricing

More and more spinners expect
polyester prices to begin coming back down sooner rather than later.

“That’s a positive because you can’t get your yarn prices up based on the polyester prices,”
said a specialty multisystem spinner. “We are relying more on offshore fiber manufacturers in our
sourcing out of necessity.”

“I have trouble understanding how Asian fiber producers can undercut domestic producers,” he
continued. “[Asian producers] have managed to hold their prices down long after the US producers
raised theirs.”

Probably the most ominous trend some spinners have reported is an erosion of their customer
base because of ever-growing finished fabrics imports. Finding a way over, under or around this
trend may be the greatest challenge facing US spinners today.

“Domestic business as a whole is relatively soft,” said a multisystem specialty spinner. “We
continue to see a consolidation of our customer base and continued diminishment of domestic
manufacturers as they close their doors or sell out.”